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tv   Nightly Business Report  PBS  January 12, 2011 6:30pm-7:00pm PST

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>> susie: another storm blankets the east coast, canceling thousands of flights and costing the airlines millions. >> tom: but analysts say lost ticket revenues aren't the biggest problem. we'll tell you what airlines end up spending the most on during bad weather. you're watching "nightly business report" for wednesday, january 12. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. the blizzard is the third one this winter and it's been disruptive for many companies. >> tom: it sure has, especially true for u.s. airlines. more than 6,000 flights were canceled today, that means of course lost revenue and extra costs to reroute passengers, planes and crew. >> susie: erika miller takes a look at how big a toll will this take on the major carriers this
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>> reporter: snowy weather has left thousands of planes grounded, so will airline profits get pounded? that's a big concern for investors in those stocks. the s&p arca airline index hit turbulence starting back in november. though it's a typical seasonal pattern, analysts say the volatility was made worse by bad storms. according to analyst estimates, the snowstorms so far this winter could cost the industry as much as $500 billion. --$.5 billion that sounds like a lot, but in reality it's only a small fraction of what u.s. airlines earn each year industry consultant bob harrell says what's different this year is cities like atlanta that don't normally get a lot of snow got hit. >> storm there is more disruptive for two reasons. one, it's in an area that is less prepared to handle snow-- in a southern city like atlanta. and two, it's a major hub for delta. for example, whenever that happens, you have the multiplication effect. >> reporter: for most major carriers, the problem is not lost ticket revenues. airline specialist ray neidl
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estimates 80% of that money is eventually recovered. most of the financial toll comes from other disruptions. >> the airlines do incur a lot of costs though by having crews out of place over time. snow removal costs. having equipment out of place. and that's where a really big part of the costs do occur. despite the storms, airline profits are expected to soar in the first quarter. up 48% for the year as a whole, they're forecast up 24%, far better than the overall stock market. the reasons are higher fares, fuller planes, and more profitable route networks. but watch out for one wild card. >> fuel costs could ruin the party. if fuel costs go up too fast, the airlines can't handle it. >> reporter: there is one thing stranded travelers are hoping will go up fast... grounded planes. erika miller, "nightly business report," new york. >> tom: here are the stories in tonight's n.b.r. newswheel:
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an upbeat take on the economy from the federal reserve helped out stocks. the dow rose 83 points, the nasdaq added 20, the s&p 500 was up 11.5. trading volume was up on the big board from yesterday's pace, but fell slightly on the nasdaq. as i mentioned, the latest fed survey on the economy is cautiously optimistic. the beige book shows improvement nationwide, but the job market remains soft with businesses still reluctant to hire. illinois residents could soon see a huge state income tax hike. democratic lawmakers there okayed a 66% jump, from 3% to 5%. the governor will sign it to help close illinois' $15 billion budget gap. and after a four day shutdown, oil is finally flowing through the trans alaska pipeline, but not at full capacity. just 400,000 barrels a day. that's two thirds of its normal flow. still ahead, we check in with value investor mario gabelli, where he sees value in the
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coming year, and why he believes buy and hold is alive and well. >> susie: the key problem in this economy is jobs. so tonight we get a perspective from an executive whose company is hiring. he's honeywell c.e.o. david cotea. the company expects to increase sales 6% to 9% this year. as washington bureau chief darren gersh reports, the question now is whether that will mean more jobs. >> reporter: if you want to know where the jobs will come from in the coming year, you should take the temperature of a company like honeywell. after rounds of layoffs and furloughs, the company now expects earnings to grow around 20% this year. and in the last six or seven months, hiring has picked up too, says honeywell c.e.o. david cote. >> because there is so much uncertainty, you can't be sure. i think people are going to continue to be cautious, including us. and we'll be very careful, because we need to make sure the demand is there before you go hiring the people.
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>> reporter: in washington, the debate over hiring often seems stuck in finger-pointing over whether there is too much regulation or not enough government spending. cotes says the solution is in private sector demand. >> i don't think there are many c.e.o.s out there who would say, "geez, things are booming, but i'm uncertain on regulation, so i'm not going to hire people." while i'd be the first to say that uncertainty on regulation doesn't help, at the end of the day, i think the bigger driver is uncertainty of demand. >> reporter: cotes also doesn't think the great recession has made great changes in the long- term job outlook. he expects jobs will come back. but he thinks the long term outlook for job creation will depend on innovation, and the answer there will be found in the nation's classrooms. >> first, more engineers. you take a look at most of the innovation, it's coming from engineering area. whether it is in technology, new products, new markets. most of this comes out of the engineering sector.
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>> reporter: and we need less government debt. cotes says the u.s. cannot be a strong military or economic power if it one day ends up paying $1 trillion a year in interest on the national debt. you served on the president's commission on fiscal responsiblity. are you encouraged or discouraged by the response that report got? >> i've been very pleased with the dialogue that i've seen going on in the senate-- that's been occurring in the house and the leadership that we're seeing from the president on this. and all of those things have to come together, but i have never- - i call it the three "h"s. i have never seen such hysteria, histrionics, and hyperbole as that which surrounds government budgeting. if you take a look at our fiscal commission proposal for example, the growth rate in government spending, the plan is for government spending to grow 5% a year for the next ten years. the commission proposal has it
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growing 4% a year instead of 5%. yet you see words like draconian, cut, slash, hurting every constituency you can think of. i've never seen anything like it. i don't know how people down here get their jobs done with this kind of yelling and screaming going on. >> reporter: david cote, c.e.o. of honeywell, thank you. >> tom: the republican effort to repeal health care reform is on hold due to the tragic shootings in tuscon last weekend. still, the implementation of the health care law continues. alan miller is the chairman and chief executive officer of universal health services. u.h.s. runs more than 100 hospitals and medical facilities. he joins us from philadelphia. welcome to "nightly business report", nice to see you. >> thank you, tom. >> tom: so far health care reform has required insurance companies to cover adult children up to 26 years old, a limited lifetime limit and provided tax benefits for small businesses offering insurance him have these changes meant more patients for your firm? >> no, not immediately. we're seeing some, i guess, from
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the children that have been added. but the big number will come when the mandate comes in and 31 million people will have to have insurance who don't have it currently. >> tom: there's a mandate that continues to be fought in court. supporters say this reform ames to get more people health insurance grooing for instance that individual mandate and limit the growth of spending. which is the big tub or maybe the bigger threat to u. h. s.? >> well, we obviously would be very happy to see 31 million additional people have insurance coverage. but i have not seen the cost savings in the plan. i think the plan attempts to increase coverage, which is good but i haven't seen the cost savings. i'd love to see some tort reform put in, which would save a great deal by way of premiums, and defensive medicine, so that would be one good step. a good step to be, would be to let insurance companies sell
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across state lines, things of that sort, which would make it more efficient. we haven't seen that yet. >> tom: when talking about cost let's talk about where your form finds its profits and we'll take a look at net income in the third quarter here. pretty evenly split between your hospital operations and your behavioral facilities, 45 for hospitals, 55% behavioral health talking about net income. who is paying for that revenue is an interesting graphic as well, and you know these numbers very well, a third of the payments coming from the federal government health care plans, just under one half from private insurance companies. and the rest from other sources. so what is the risk of reform for medicare and medicaid payments to u. h. s.? >> well, the only thing that we would be concerned about, we'll have many more patients, and the insurance companies will have many more subscribers, so that's all good. the question would be how does the government handle reimbursement going forward. but again, if we have that volume, the general feeling is
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that it will be very good for providers because we have so many more people that would be covered and could pay their bills. >> tom: do you think that u. h. s. and its share holders will be better off with reform than if it gets repealed? >> well, you know, it's hard to say, because if this is repealed well, you're talking about repeal. i was focusing on this challenge now in the court with regard to constitutionality. if that happens, and the individual mandate goes away, then you wouldn't have, under the current provisions, 31 million more people, and what would that affect be on the insurance companies. because if they have mandated coverages and they don't get the extra volume, how could they move forward. so then the whole thing goes up in the air. i think the question of this constitutionality with 20 states
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challenging it, that's really the lynch pin of the whole thing. and it's very, very interesting to see what happens to that. >> tom: absolutely, one that you're watching closely, your stake holders and shareholders and the entire economy no doubt. our guest this evening from philadelphia, the chairman and c.e.o. of universal health systems, alan miller. >> tom: we saw a solid portuguese bond auction in europe and a generally positive
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federal reserve report on regional economies helping out u.s. stocks, let's get you updated in tonight's market focus. pushed all three major indices to new post-recession highs. >> tom: today's stock rally came today's stock rally came as we continue to see traditional fear gauges shrink, feeding new optimism. the classic traders fear index, the chicago board options exchange volatility index, is hovering near lows. bond prices continue to drop and that tells you people are more comfortable with stocks, and short interest on the new york and nasdaq exchanges dropped last month. short interest measures how many sales are sold short, essentially betting prices will fall. now as optimism in stocks grows, we saw a pop in crop prices as the u.s. government cut the size of global supplies. corn prices jumped 4%.
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in fact, at one point, they were lock-limit up, meaning they couldn't trade any higher, but they backed off those highs. but still, this is a two-and-a- half year high. beans still in the teens. same for soybeans. prices are up almost 50% since this summer. we will see how these higher food prices play into inflation numbers tomorrow and friday. higher crop prices helped ag stocks. fertilizer maker c.f. industries was up 5%. seed maker monsanto jumped 3%. and deere rallied 2%. c.f. and deere hit new highs. financial stocks overall led the equity market rally as the banking analyst at wells fargo predicts superior earnings growth from big banks. j.p. morgan led the dow, up 2.5%. it matches the high we saw last week on this 180-session chart.
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the bank's c.e.o. predicted a dividend hike in the second quarter. bank of america rallied 2%, making it the second best dow stock. and b. of a. has rocketed up since early december when it fell below $11 a share. speaking of recent red hot stocks, chip maker micron. here are the past 90 sessions. nice 7% move today. since christmas week, the stock is up 20%. take a look at nvidia, meantime, continues its big move, adding another 15%. on this 90-session chart, nvidia has moved more than 50% in less than two weeks. here's the past year, the stock has been gaining momentum. the company announced a new mainstream computer chip and settled a licensing deal with intel. speaking of-- intel earnings are tomorrow after the close. another set of big movers in retail.
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zales rocketed 43%. november and december same-store sales saw a big jump. wet seal was up 12%. its new c.e.o. was the number two at american eagle outfitter. and yoga clothing retailer lululemon was up 8%. better-than-expected earnings boosted its outlook. finally, i.t.t. it makes industrial, defense and technology equipment, and it's splitting into three different companies based on those businesses. shareholders like it, sending the stock up more than 16% on very heavy volume. this is a new 52-week high. very heavy volume. and that's tonight's "market focus."
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>> susie: our next guest represents the gold standard when it comes to buy-and-hold investing. he's legendary investor mario gabelli, the chairman of gabelli asset management company investors, or "gamco". when i talked with mario today he told me why he's bullish for 2011. >> in the world of change, in the world of dynamics there's always opportunities. in particular in the united states, i think the 80% of the unemployed are spending, clarity because of what happened with the new election in november, conviction, leads to action. and corporations are going the start hiring again, and slowly but surely the u.s. works its way out of this problem. and the rest of the world is kind of moderate. >> susie: you're a value investor. are you seeing a lot of value stock opportunities these days? >> what we do is fundamental research, go out and see a company, what's the company worth, who is going to buy it. will they do financially engineering. but in terms of investment
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opportunities, the reason we find bargains all the time when we look is that there are a lot of companies that individuals don't overlook, for example they're waiting for boeing to announce that they're starting to ship the dream liner and airbus shiping the new airbus on their part. we are buying in advance of that companies that derive demand from boeing because we think that will work and we think demand from china and india will become very visible in the next 12 months. crane, curtis right, and even boeing itself. >> susie: so what is the test that a stock has to pass for you to buy it? >> first we lk at what's going to happen in an industry over the next five years, for example the number of babies being born, the amount of money spent per child. what happens to children's pediatric nutrition. what is the company worth in five years, where is the stock today, will it be taken over, and the answers all came up like the sun, the moon and the stars,
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yes, so we would buy that company. >> susie: right now it's earning season. what are you looking for out of the earnings that companies report that will guide you in terms of making an investment? >> well, that's a good question. what we hope is that companies have problems that we like so, the stocks go down. that is heaven for value investors. what we like to do is find other people just dumping stocks and they are in our sweet spot. and that's what we just wait there. >> susie: what's in your sweet spot right now? >> we like companies that provide instant coffee, that single serve, sarah lee would be an example of that. companies that are in play like beck man counter, which is a diagnostic company. >> susie: and you're looking for companies that you think will be merged, right? >> we start in january of 2010 and a new wave of con sl dags hit an air pock net the spring, we're back. corporate love making, they have companies want to grow, they can
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either start a plant or they can bias sets. it's cheaper to bias it's, -- buy assets. >> susie: do you still like verizon now that it's come out with the iphone? >> the iphone is an important element but not the decisional element to own it. what's important is what you have on your lap and is that ipad and all these devices, the world has gone mobile. wireless. and all of the dynamics of the digital age are here in front of us, they are the owners of the highway, so verizon at $37 is still a bargain. but looking out three to five years, the next step is ivan is going to merge that company with another company and have a foot print, nothing wrong with that. >> susie: what about apple, does it pass your value test? >> no. there's no way in the world apples a value stock. >> susie: is there a stock that you regret that you haven't bought in the past? >> i regret that i went into business and didn't put all my
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money, borrow steal and why my credit cards on berkshire hathaway and just sit back for 25 or 30 years and play golf. >> susie: would you tell investors to buy perk shirt hathaway today? >> no, it's not my kind of stock any more. got a market cap, it will benefit from everything he's done, smart guy, made a lot of good bets and the stock will do well, but not what i am doing for my clients. >> susie: you've been in the investment business for 40 years now. is there one important investment lesson that you can share with our viewers? >> patience, and buy things at a discount. do not buy things wholesale, buy them cheap and at wholesale -- cheaper than wholesale. and find businesses run by good people and there are many of them and hold them. >> susie: thank you so much and good to see u.. >> always a privilege to be here and talk about stocks. >> tom: tomorrow, blackrock c.e.o. larry fink joins us with his investment outlook. we'll also see weekly jobless claims, december's producer
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price index and november's trade balance. also "street critique" guest hilary kramer answers your questions. she's editor of gamechangerstocks.com. there's still time to send one in. you can email us at streetcritique@nbr.com. >> susie: chrysler is gearing up for an initial public offering as early as this fall. it would come just two years after the company went bankrupt and got a bailout from uncle sam. c.e.o. sergio marchionne says goldman sachs will advise on the offering. and he thinks chrysler will see a 25% increase in sales this year, to two million vehicles worldwide. well those gains are thanks to strong sales of its all-new jeep grand cherokee and re-styled dodge ram truck. >> tom: first it was verizon, now newscorp. apple is teaming up with rupert murdoch's media company to launch the world's first ipad newspaper. now a formal announcement on the venture is set to take place next week in san francisco, but about 100 journalists are already on the payroll in many u.s. cities, including new york and los angeles.
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details have not been released on how much a subscription would cost. >> susie: while a lot of people bank online, tonight's "money file" commentator thinks few people realize just how powerful that tool can be. she's manisha thakor, co-author of "on your own two feet: a
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modern girl's guide to personal finance." >> is it time for you to take your online banking relationship to the next level? 80% of u.s. online households bank online. however, many of them are still doing it the old fashioned way-- one click at a time. what many people don't realize is that you can use the online banking offered at your primary bank as a financial command central. by that i mean you can both send and receive bills right from that one website. why should you care about this? three reasons. number one: it makes your financial life easier. when you use your primary financial institution as command central for your bills, you only have to remember one password and log in one time. number two: it gives you control.
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according a recent study, a whopping 64% of consumers have lost a paper bill in their home and another 57% have experienced a paper bill being lost in the mail. when you use your bank or credit union as your financial command central, you always know where those bills are. number three: it gives you safety. last but not least, when you use online banking, it's like banking with kevlar on. you are reaping the benefits of all the money financial institutions have spent on encryption and fraud detection tools. how about it? i'm manisha thakor. >> tom: that's "nightly business report" for wednesday, january 12. i'm tom hudson. good night everyone, and goodnight to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
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this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org. >> be more. pbs.
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